An offer to resolve a dispute through a legally binding contract, often involving financial compensation, can arise for various reasons. For instance, a company might propose this to avoid the cost, time, and uncertainty of litigation, particularly when the potential outcome is unfavorable. It could also serve as a way to manage reputational risk associated with public legal battles or negative publicity. Sometimes, this approach is chosen to resolve internal disputes, such as allegations of discrimination or wrongful termination, before they escalate. In other instances, it can expedite separation from an employee when a swift and discreet departure is desired by both parties.
This method of dispute resolution provides several advantages. It offers predictability and control over the outcome, unlike a court or tribunal decision. Confidentiality clauses can protect sensitive information and prevent public disclosure of potentially damaging details. Moreover, such agreements typically include a release of claims, which prevents future legal action related to the same matter. Historically, these resolutions have become increasingly common as a means of managing workplace conflict and mitigating legal risks. This trend reflects a growing preference for efficient and private dispute resolution over lengthy and costly legal proceedings.
